Question

Consider a loan for \$100,000 to be repaid in equal installments at the end of each...

Consider a loan for \$100,000 to be repaid in equal installments at the end of each of the next 5 years. The interest rate is 8% compounded annually. What is the remaining balance of the loan after 2 years?

A. 64,005

B. 74,954

C. 64,545

D. 25,046

E. 49,909

STep 1 Calculate the Annual payment required i.e. EMI

PV = Annual payment x cumulative disounting facto @8% for 5 years

100000 = AP x 3.99271

AP = 25045.6457

Step 2 draw Amortization table:

 Opening Balalnce Annual Payment Interest @ 8% on Opening balalnce Principal portion Annual payment - Interest Portion Closing balance Opening - principal portion 100000.0000 25045.6457 8000.0000 17045.6457 82954.3543 82954.3543 25045.6457 6636.3483 18409.2974 64545.0569 64545.0569 25045.6457 5163.6046 19882.0411 44663.0158 44663.0158 25045.6457 3573.0413 21472.6044 23190.4114 23190.4114 25045.6457 1855.2343 23190.4114 0.0000

As it is clear from above option C is correct